A federal judge in Winston-Salem, N.C., has rejected a request by Laboratory Corp. of America Holdings to dismiss all allegations of ERISA violations in a lawsuit filed by a 401(k) plan participant.
The plaintiff sued the company 12 months ago alleging that the plan charged excessive record-keeping fees and offered retail-share fees for 14 investment options instead of cheaper institutional-share fees.
"The court finds that plaintiff identifies sufficient benchmarks against which to compare the LabCorp Plan," U.S. District Court Judge Loretta C. Biggs wrote on July 28 referencing the record-keeping fees allegations in the case of McDonald vs. Laboratory Corporation of America Holdings. The plaintiff is seeking class-action status.
"The court further finds that the comparisons, in combination with the allegations that defendant did not track how much it paid or solicit competing bids for over six years, sufficiently allege a claim that defendant breached its duty of prudence by not investigating and negotiating its record-keeping fee arrangement," the judge wrote.
As for the 14 challenged investments, the judge supported the plaintiff's allegations on 13 of them. "Plaintiff has plausibly alleged that defendant breached its fiduciary duty of prudence by retaining high-cost share classes of mutual funds when lower-cost share classes of the same funds were available," the judge wrote.
She dismissed one allegation that the plan should have replaced a mutual fund with a collective investment trust.
The Laboratory Corp. of America Holdings 401(k) Savings Plan had $4.5 billion in assets as of Dec. 31, 2021, according to the latest Form 5500.
